A New Bull Market Is Coming: 3 TSX Stocks I’d Load Up on Before it Gets Here

Economists anticipate a recession this year. Surely, bull markets will follow recessions. Buy these stocks before it gets here!

| More on:
A bull outlined against a field

Image source: Getty Images.

Economists generally believe that Canada and the U.S. will experience a recession this year. All this talk about a recession is sort of gloomy. Let’s fast forward a bit. Stocks are long-term investments after all. Besides, the stock market leads the economic cycle. So, it’s possible for stocks to rebound before the economy actually turns around. Investors should be confident that a new bull market will come — likely sooner than you think.

When there’s a hint of a new bull market coming, signaled by rallies in stocks, it would be the time to buy cyclical stocks. Here are three such TSX stocks to load up for this.

Magna International

The stock of global autoparts maker Magna International (TSX:MG) tends to do poorly in recessions. However, coming out of recessions, during economic expansions, it does extremely well. If investors can time their buys, they could bank on some exceptional gains.

For example, in the 2008/09 recession, the stock lost about half of its value from peak to trough. Then, from 2009 to 2014, it grew investors’ money almost seven-fold and delivered explosive annualized returns of about 38% per year!

Again, in the pandemic recession, the stock fell about 50% from peak to trough. From the pandemic market crash bottom in March 2020, it has delivered annualized returns of over 37% per year.

If this year’s anticipated recession brings Magna stock significantly lower, investors should consider taking a position and waiting a few years. The company has staying power with a strong balance sheet and a sustainable payout ratio. Its dividend is good for a yield of about 2.8% right now.

Canadian Western Bank

Banks are cyclical, too. They tend to do well when the economy does well. When the economic outlook is bright, consumers spend more and companies invest more. Companies would also be able to raise more capital in such an environment.

Canadian Western Bank (TSX:CWB) is a more cyclical stock than its bigger counterparts. After years of diversification efforts, it now has 31% of its loans in resource-rich Alberta. Its other two significant provinces are British Columbia (33% of loans) and Ontario (24%). A big portion of its loans are commercial loans, which are generally riskier than personal loans.

Specifically, at the end of 2022, its loan portfolio is diversified as follows: 35% in general commercial loans, 21% in commercial mortgages, 19% in personal loans and mortgages, 15% in equipment financing and leasing, and 9% in real estate project loans.

At $26.80 per share at writing, the Canadian bank stock trades at about 7.4 times earnings, which is one of the lowest multiples versus its peers. It also compensates shareholders with a decent dividend yield of approximately 4.6%. It has raised its dividend for about three decades!

Brookfield Corp.

Brookfield Corp. (TSX:BN) pays a tiny dividend yield versus the other two TSX stocks. However, it can still be a solid investment in a new bull market. The growth stock is also sensitive to the economic cycle. This is why it’s a good idea to buy the stock after it has sold off in a downdraft.

The company is well-capitalized and does an exceptional job owning and operating real assets. It has targeted and achieved long-term returns on investments of 12-15%. Its long-term capital is primarily invested across asset management, insurance solutions, and its operating businesses. Together, they generate growing cash flows.

Brookfield is a durable business that will steadily make investors wealthier. It also boosts investor confidence via a growing dividend.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has positions in Brookfield and Canadian Western Bank. The Motley Fool recommends Brookfield, Brookfield Corporation, Canadian Western Bank, and Magna International. The Motley Fool has a disclosure policy.

More on Dividend Stocks

protect, safe, trust
Dividend Stocks

Worried About a Recession? 2 TSX Blue-Chip Stocks to Protect Your Capital

If you fear a recession coming on soon, here are two blue-chip Canadian stocks to add to your portfolio for…

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

New TFSA Investors: 2 Top TSX Stock to Create a Self-Directed Retirement Fund

Top TSX dividend stocks are now on sale for new TFSA investors.

Read more »

money while you sleep
Dividend Stocks

Worried About the Market? 2 Dividend Stocks That Let You Sleep at Night

Here's why Restaurant Brands (TSX:QSR) and Enbridge (TSX:ENB) are two top dividend stocks to buy in this uncertain market right…

Read more »

money cash dividends
Dividend Stocks

How 1 Absurdly Cheap Stock Can Generate $100 in Monthly Passive Income

You can generate $100 or more in monthly passive income from one high-yield stock trading at an absurdly cheap price…

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

How I’d Invest $1000 in February to Make Easy Passive Income

Looking to earn some extra passive income in February but don't have much cash? Build an easy portfolio with these…

Read more »

sad concerned deep in thought
Dividend Stocks

Is it Worth Investing in Rogers or Shaw Before the Pending Merger?

A Rogers stock and Shaw stock deal looks all but certain, yet should investors still buy the stock? Or are…

Read more »

runner ties shoe while stopped on grass outside
Dividend Stocks

Is Nutrien Stock a Buy in February 2023?

Nutrien stock should benefit from the very favourable supply/demand fundamentals in the agriculture business in 2023.

Read more »

thinking
Dividend Stocks

Is Brookfield Asset Management a Buy in February 2023?

Brookfield Asset Management is among the largest stocks trading on the TSX. Let's see why BAM stock is a buy…

Read more »